INTERNATIONAL POLITICS: Global significance of China-India relations

After decades of mutual hostility, two of the most populous countries of the globe, China and India, are discovering that they have good cause to cooperate, writes Sharif Shuja.

In today's rapidly changing international environment, it is in China's interests to discover areas of political engagement with countries where there are prospects of a mutually beneficial relationship.

India now figures importantly to China. The general feeling is that China would like to have closer relations with India.

The global stature of India today as an emerging power is a result of its recent economic growth, its nuclear tests and capability, and its search for a greater role in the international system.

Lee Kuan Yew, the long-serving former prime minister of Singapore, declared: "China and India will shake the world. In some industries, these countries have already leapfrogged the rest of Asia."

And he argued that, in terms of global corporate presence and reputation, India was ahead of China.

China and India have radically different economic models. But, given their relative advantages and flaws, both are expected to deliver very high growth for decades.

What makes the two countries especially powerful is that each complements the other's strengths.

China will remain the manufacturing giant, while India is a rising power in software, design, services, and precision industry.

India's companies are more profitable and its banks are in better shape, but China lures more investment. China has surged ahead of India, but India's younger workforce and swelling population will help it catch up.

The US firm Goldman Sachs predicts that, in light of India's present six per cent annual economic growth, it is possible that India by 2050 will rank as the world's third largest economic entity after China and America.

One implication is that the balance of power in many technologies will likely move from West to East. An obvious reason is a combined half a million engineers and scientists graduate in China and India each year, compared with only 60,000 in the United States.

And because the two emerging giants can throw more brains at technical problems at a fraction of the cost, their contributions to innovation will grow.

China, which for decades has regarded India with a mixture of apathy and suspicion, is beginning to take note of India's growing economic strength and its attempts to beef up its armed forces.

Similarly, Indian attitudes towards China have also changed and are becoming more positive.

Policy-makers in New Delhi increasingly speak of China more as a partner than as a threat, while China's Premier Wen Jiabao, in an interview with India Today on August 22, 2005, spoke of how relations between the two countries, once bitter enemies, are "acquiring a global and strategic character".

More assertive

China and India are more assertively pursuing their respective interests in the Middle East and Africa.

China looms large in India's sights. Last year, however, saw a rapprochement and friendship established between the two countries. Economic synergies have brought India and China closer than ever before.

The two countries have skirted around border disputes in order to speed up progress in every other area. No Indian's business itinerary is now complete without a visit to China; no holiday package excludes a trip to Shanghai or Beijing. Trade between India and China has multiplied, and the two countries find that their mutual interests in trade and market accessibility are in harmony.

India and China are set to become new powerhouse global economies. Together they account for almost one-third of the world's population, are among the fastest-growing economies, and already have a combined GDP close to America's $US12 trillion.

The voices of Beijing and New Delhi are likely to be increasingly heeded in the deliberations of the international institutions that try to manage the global economy, including the World Trade Organization.

Moreover, China's and India's economies are likely to shape the international environment through new initiatives such as the preferential trade agreements that are currently spreading across Asia.

India's External Affairs Minister, Natwar Singh, said that building strong ties with China is a top priority for the new government. India will continue to have "close relations with the United States of America while at the same time strengthening relations with other important nations such as Russia, China, the European Union and the Association of South East Asian Nations (ASEAN)".

Mr Singh pointed out that Sino-Indian relations are "problem-free, except for the border question, but a mechanism has been set up for addressing that problem".

Chinese officials like to emphasise that they do not view India as a regional or strategic rival. "It is always better for your own security," a Chinese analyst has said, "that your neighbour remains a friend and is not an enemy."

Boundary disputes

Beijing is keen to push for a boundary settlement with India and develop a constructive and cooperative partnership with New Delhi.

Recently, Chinese Premier Wen Jiabao visited New Delhi and signed agreements which suggest that India is willing to shed its opposition to Chinese control over Tibet. In return, China will tacitly recognise India's claim to the Himalayan state of Sikkim.

This does not mean that both countries have resolved their border differences. India still claims part of Chinese-controlled northern Kashmir (which was ceded to China by Pakistan) and the remote Aksai Chin area; while China disputes India's control over its north-eastern state of Arunachal Pradesh.

No imminent major breakthroughs are expected; but proclamations from both countries point towards continued slow and pragmatic progress.

China and India have also signed a number of agreements designed to reduce tension, such as avoiding large-scale military operations in border regions. The flexibility displayed by the two countries to resolve some of their border disputes is a significant shift.

China continues its military and political support to Islamabad, but a more neutral stance on the Kashmir dispute between Pakistan and India has pleased policy-makers in New Delhi, as has Beijing's support for India's claim to a permanent seat on the United Nations Security Council.

However, the real motivator behind the warmth in relations between India and China is trade and commerce. Bilateral trade stood at $US13.6 billion in 2004, representing one per cent of China's global trade and nine per cent of India's.

The prospect for bilateral trade touching $100 billion within the next few years is no longer an impossible aspiration. The two countries have shown interest in a free-trade agreement, but that may take some time. In the meantime, they are reducing tariff barriers. Nevertheless, substantial non-tariff barriers also exist that impede flow of goods and services between the two countries.

Naval capacities

But, while bilateral trade and political relations are improving, that doesn't mean that the two countries are not directly competing in other areas. As the ambitious plans and the capacities of the navies of the two countries increase, some amount of friction is bound to emerge.

Already, New Delhi is worried about an increasing Chinese presence in the Bay of Bengal and the Indian Ocean.

Mr Wen's visit indicates that India and China, in the immediate future at least, are headed toward greater pragmatic cooperation, but not towards any broader alignment on foreign policy.

Both India and China share the aspiration of a world order that is multipolar and takes greater account of their role. They also realise that there is much to be gained in cooperating and expanding commerce and trade relations and ensuring that the troublesome issue of border disputes remains on the backburner.

Overall, this is good news for regional peace and stability. Reinforcing this trend is both countries' strong relations with the US.

The notion of an India-China axis should not be understood in its traditional negative sense. The grouping is not expected to confront any country or alliance, and especially not the USA. In fact, both India and China are seeking to improve relations with Washington.

US and Israel

By and large, India's strategic community feels more comfortable with India developing close strategic ties with the US and Israel. Many are particularly opposed to closer ties with China - at least until China vacates the thousands of square kilometres of Indian land it captured in the 1962 war.

Dr Sharif Shuja is research associate at Monash University's Global Terrorism Research Unit.